Coca-Cola Company Generic Strategies

Executive Summary

In this paper, Coca-Cola Company which is the biggest beverage company in the world has been analysed. A comprehensive strategic analysis to ascertain its competitive advantage has been conducted using the following analytical tools: SWOT analysis and Porter’s generic strategies. Out of the four generic strategies, it has been revealed that Coca-Cola Company follows the differentiation strategy.

 

By integrating the differentiation strategy with the strengths, weaknesses, opportunities, and threats of the organization key insights were noted. The strengths pinpointed and selected in the SWOT analysis comprise of distribution system, company valuation, and brand equity. Coca-Cola Company’s system of distribution is unique and inimitable. Second, its high market value facilitates sustaining differentiation and brand equity aids in ensuring its different products are purchased across the world. The three items selected in the weaknesses area in the SWOT analysis include the intense market rivalry with Pepsi, lack of a healthy beverage offering, and low product diversification. It is imperative for Coca-Cola Company to diversify the range of products being offered in the market. In addition, the company should roll out a range of healthy products.

 

Coca-Cola Company ought not to alter its vision and mission. This process of strategic analysis has reconfirmed the company’s vision and mission. The organization is intentional in what they undertake and within its business operations, which can be seen even through its marketing. Their marketing videos inspire happiness principally and afterward the product. Furthermore, Coca-Cola Company emphasize on relationships rather than solely generating revenues and its advertising and marketing focuses on accomplishing its key goal, which is spreading happiness and endorsing kindness.

 

Coca-Cola Company Generic Strategies

In accordance to Porter’s Generic Strategies model, there are four basic strategies that firms can utilize in order to gain a competitive advantage over their market rivals. These strategies comprise of cost leadership, differentiation, cost focus, and differentiation focus (Porter, 1985). With respect to the cost leadership strategy, an organization endeavours to establish itself as the low-cost manufacturer in its industry. If an organization can attain and maintain general cost leadership, then its performance in the market will be above average, on the condition that it can command the prevailing prices at or almost the industry average (Porter, 1985). Secondly, in a differentiation strategy, an organization strives to attain uniqueness and distinctiveness in industry of operation, which comes along with a premium price. The third and fourth strategies ate the cost focus and differentiation focus strategies. First, with regard to cost focus, an organization endeavours to attain a cost advantage its target market segment. Second, with regard to differentiation focus, an organization endeavours to attain differentiation in its target segment (Porter, 1985).

 

Of the four generic strategies, Coca-Cola Company follows the differentiation strategy. From the time the company was founded in 1886, Coca-Cola Company has become a reputable and well-known trademark not only in the United States but across the globe. Imperatively, the organization has successfully differentiated itself by being renowned as the biggest producer, distributor, and marketer of non-alcoholic beverages in the world. In the contemporary, Coca-Cola Company retails more than 3,000 products marked with its famed trademark in over 200 nations across the globe. Despite facing competition from Pepsi, the company has been able to maintain its significant success and market domination. Moreover, the organization follows the generic differentiation strategy by spending substantial amounts of money for marketing and advertising campaigns in order to differentiate itself and generate a distinctive image for its various products. According to Bailey (2014), advertising and marketing campaigns have substantially increased the organization’s brand supremacy throughout the years. For instance, in the 2013 fiscal year, Coca-Cola Company spend almost $4 billion, equivalent to 7 percent of its 2013 revenues generated on advertisements. In particular, the recipe for manufacturing Coca-Cola has been kept a secret and the company is able to advertise that its drink is inimitable and cannot be copied by industry rivals. Up until now, no individual is able to pinpoint the manner in which Coca-Cola is manufactured. This ensures that the product continues to be perceived as being unique in the market as compared to other products such as energy drinks and juices. Moreover, the Coca-Cola Company has an emblematic red marker with white calligraphy that can be recognized anyplace in the world. Moreover, the organization can be perceived to follow the differentiation strategy by positioning its brand in numerous dissimilar merchandise ranging from vehicles, clothing, and also in sponsorships of events such as the Olympics and the World Cup. These sponsoring activities have ensured that the company has continued to be distinctive in the market as compared to other companies in the market with consumers being aware of the brand.

 

Coca-Cola Company’s Strategic Choices

In Module 2 Case Study, the SWOT analysis of Coca-Cola Company was recorded as follows (Bhasin, 2018):

Strengths

Weaknesses

 

1. Brand Equity

2. Company Valuation

3. Extensive International Presence

4. Greatest Market Share

5. Brilliant Marketing Plans

6. Customer Loyalty

7. Distribution System

1. Competition with Pepsi

2. Low Product Diversification

3. Lack of a healthy beverage offering

4. Water management

 

Opportunities

Threats

 

1. Diversification

2. Focusing on developing countries

3. Packaged drinking water

4. Supply chain management

5. Market lesser selling offerings

1. Sourcing of raw materials

2. Indirect competition

 

In this section, three points from each of the four areas of the SWOT analysis will be integrated with the differentiation strategy. The strengths pinpointed and selected in the SWOT analysis comprise of distribution system, company valuation, and brand equity. These three strengths are all in support of the company’s generic strategy. The distribution system of Coca-Cola Company is distinctive and is very hard for industry rivals to match. In fact, the size of the system is second to none. The closest company to challenging this system is Pepsi and significantly falls short in its international distribution. Secondly, company valuation aids the company in maintaining its differentiation. In accordance to Statista (2015) Coca-Cola Company’s valuation has increased two-fold in the past decade from $40 billion in 2006 to $84 billion in 2015. Lastly, the company’s brand equity is significantly high, being renowned across the globe and loved by consumers all over.

 

The three items selected in the weaknesses area in the SWOT analysis include the intense market rivalry with Pepsi, lack of a healthy beverage offering, and low product diversification. However, it is imperative to note that Coca-Cola Company has not yet attained perfect alignment of its strengths, weaknesses, opportunities, and threats with the selected differentiation strategy. One of the specific points of disconnect takes into account its shortcomings in the market. The differentiation strategy can be perceived in the sense that Pepsi manufactures and retails beverages that resemble Coca Cola but are not similar. One of the key shortcomings to Coca Cola is that research has indicated that majority of the consumers are not able to make a distinction between the two, with regard to taste. Low product diversification is a strategy that is not in alignment with the generic strategy of Coca-Cola Company. What the organization ought to do is to diversify the range of products being offered in the market. This will enhance its competitive advantage in the market because it will have inimitable products. The same case applies to the lack of a healthy beverage offering. What Coca-Cola Company ought to do is to come up with a range of healthy products. In the present day, progressively more consumers are leaning towards a healthy lifestyle and therefore prefer to purchase healthy beverages that are not carbonated (Stewart, 2014).

 

Leveraging Strengths and Shoring Up Weaknesses by Altering Strategic Choices

The Coca-Cola Corporation can leverage its strengths and at the same time prop up its weaknesses by changing its strategic decision making. In addition, the company can make the most of ecological opportunities and diminish environmental threats by changing its strategic choices. One of the key weaknesses of the company is having a low level of diversification in its products. The strategic change that can leverage its strengths is through the creation of a new product line that satisfies the prevailing consumer needs. In the contemporary, more and more consumers are shifting towards healthy products and this includes beverages. Coca-Cola products, despite their fame, are constantly perceived as being unhealthy owing to being carbonated and having too much sugar. Bearing in mind that the company has a substantial brand equity, consumer loyalty, together with a protracted global presence, it is imperative for Coca-Cola to tap into this market prospect and create a line of healthy and fresh beverages that will satisfy these consumers. Not only will this diminish its weaknesses but at the same time will increase its market share (Stewart, 2014).

 

In addition, Coca-Cola can take advantage of its opportunities in the external setting and diminish its threats by shifting its focus from developed nations to developing nations. It is imperative to note that owing to the growth and product range retailed by companies such as Starbucks and Costa Coffee, Coca-Cola Company is experiencing a great deal of rivalry. Through expansion and emphasis on growing the developing market, the company will be able to retail its products to a newer and greater market share and facilitate its sales. At the same time, this will alleviate the problems being faced by the company regarding the scarcity of water as the developing nations will offer Coca-Cola with increased sources of water to facilitate their manufacturing processes. At the same time, by strategically focusing its energy on manufacturing packaged drinking water, Coca-Cola will be able to attain a competitive advantage over indirect competitors such as Starbucks. In addition, bearing in mind that the company has already began competing in this field with Kinley, it implies that it will be able to generate more revenue, beat its rivals in the market and at the same time increase its market share.

 

Change in Coca-Cola Company’s Vision and Mission

Based on this process of strategic analysis, I consider the company vision to be what Coca-Cola needs to attain so as to accomplish and maintain a sustainable and quality rate of growth. The prevailing vision of Coca-Cola Company is as follows:

1. “People: Be a great place to work where people are inspired to be the best they can be.

2. Portfolio: Bring to the world a portfolio of quality beverage brands that anticipate and satisfy people’s desires and needs.

3. Partners: Nurture a winning network of customers and suppliers, together we create mutual, enduring value.

4. Planet: Be a responsible citizen that makes a difference by helping build and support sustainable communities.

5. Profit: Maximize long-term return to shareowners while being mindful of our overall responsibilities.

6. Productivity: Be a highly effective, lean and fast-moving organization (Coca-Cola Company, 2017).”

This process of strategic analysis has reconfirmed the company’s vision as it has been able to consistently achieve the six key pointers in its vision over the years. Moreover, these are aspects that will guarantee sustainability and success in the industry.

The mission of Coca-Cola is:

· “To refresh the world…

· To inspire moments of optimism and happiness…

· To create value and make a difference (Coca-Cola Company, 2017).”

The core value statements that are embraced and adhered to by the company comprise of the following:

· “Leadership: The ability to have courage to shape a better future.

· Collaboration: Keep the leverage of having collective genius

· Integrity: Be real.

· Accountability: If it is to happen and be, it is up to me.

· Passion: Commitment in heart and mind

· Diversity: As inclusive as our brands

· Quality: What we do, we do well (Coca-Cola Company, 2017).”

 

An organization’s core values and mission ought to be apparent and palpable not just in what they undertake, but also what they produce. It is imperative for the mission, vision, and core values of any firm to be the basis and framework that provides the guidance for the business, the proclamation of passion and purpose, and the way through which the organization functions in the setting of an integral business (Mullane, 2002). Coca-Cola should not change its mission. In particular, the organization is tremendously deliberate with what they do, time and again within its operations and this can be perceived through its campaign. For instance, the Open Happiness Campaign was able to mirror their mission. Their marketing videos encourage happiness primarily and subsequently the product. Moreover, Coca-Cola Company lay more emphasis on relationships instead of making business sales and its advertising and marketing, while radiantly undertaken, is more emphasized on attaining its main objective, which is spreading happiness and endorsing kindness (Svendsen, 2013).

 

References

Bailey, S. (2014). Advertising is a key strategy for Coca-Cola’s growth. Market Realist. Retrieved from: https://marketrealist.com/2014/12/advertising-key-strategy-coca-colas-growth

 

Bhasin, H. (2018). SWOT of Coca Cola. https://www.marketing91.com/swot-coca-cola/

 

Coca-Cola Company. (2017). Mission, Vision, & Values. Retrieved from: http://www.coca-colacompany.com/our-company/mission-vision-values

 

Mullane, J. (2002). The mission statement is an important strategic tool: When used properly. Management Decision. Vol. 40 (5) 448-455.

 

Porter, M. E. (1985). Competitive Advantage. New York: The Free Press.

 

Stewart, J. B. (2014). For Coke, Challenge is Staying Relevant. The New York Times. Retrieved from: https://www.nytimes.com/2014/03/01/business/challenges-for-coke-to-stay-on-top.html

 

Svendsen, S. E. (2013). Refresh. Create. Inspire: A Rhetorical Analysis of the Mission, Vision and Values Behind The Coca-Cola Company and the Digital Marketing Strategies of the” Open Happiness” Campaign (Doctoral dissertation, Liberty University).

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